Public Bill Committee

[Mr. Roger Gale in the Chair]

Clause 109

Eligibility for registration

Iain Wright: I beg to move amendment No. 190, in clause 109, page 44, line 18, leave out subsections (3) and (4).
Good morning, Mr. Gale. I was tempted to say that I woke up with you this morning, but it is probably better to say that I heard you on the “Today” programme this morning.
The amendment would remove a restriction that would otherwise have required registered providers to operate their social housing
“only or mainly in England.”
We want a growing market in the provision of social housing. We do not wish to exclude bodies simply because the bulk of their housing is elsewhere. On that basis, I hope that members of the Committee will approve the amendment.

Amendment agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

George Young: The clause deals with eligibility for registration. Subsection (1) states:
“An English body is eligible for registration”.
That implies a voluntary element in the case for registration, whereas until now the assumption on which I was working was that social housing providers had to be registered with the regulator.
The Cave report covers domain regulation. Page 14 states that
“The review has also adopted two principles underlying the design of the regulatory system...to apply the same approach, where possible, across all providers of social housing”.
In other words, all providers will have to be registered rather than those who are eligible and who choose to be registered.
Page 16 of the report states:
“As noted above, an independent social housing regulator...should be established by statute, with specified duties and powers relating to the ownership and management of social housing.”
It seems that the Government adopted the same approach to the main regulation. Let us consider page 114 of the impact assessment, which states:
“The Cave review recommended that the regulator’s responsibilities should be cross domain (i.e. cover all social housing providers—Registered Social Landlords, Local Authorities, Arms Length Management Organisations (ALMOs) and private sector).”
The key sentence is that the Government were clear in their
“response to Cave that tenants should be able to expect the same minimum standards of service and have similar opportunities for empowerment, to influence delivery and to seek redress regardless of their social housing provider.”
That means that the social housing provider should not be able to opt in or opt out of the system.
I was therefore slightly surprised when the voluntary element entered the debate just before stumps were drawn on Thursday. The Minister said:
“No, in respect of the earlier point about the philanthropic organisation, it would have a choice as to whether to register voluntarily. I hope that is clear.”
He then repeated his argument:
“It would be entirely for that philanthropic organisation to make the strategic decision as to whether it wished to be regulated”.——[Official Report, Housing and Regeneration Public Bill Committee, 24 January 2008; c. 570-71.]
Against the background of an earlier debate on the definition of social housing, I took quite a lot of stick from both sides of the Committee for suggesting that a social housing provider who had not received any public funds should not be obliged to come within the ambit of the scheme. The Minister made it clear that what really matters is not who provides the house, but the characteristics of social housing. He said:
“I believe strongly that this philosophical policy point—that social housing should be defined by means of its characteristics—is the right approach.”——[Official Report, Housing and Regeneration Public Bill Committee, 24 January 2008; c. 538.]
That is why he was not sympathetic to my amendment, which defined social housing as being in receipt of public funds.
Perhaps the Minister will explain whether we are going to have two types of social housing: that which comes within the ambit of the Bill—I assume that those currently registered with the Housing Corporation will automatically register with the regulator—and, possibly, future providers of social housing whose stock meets all the requirements that we discussed in relation to clause 67 but who choose not to register. As I understand it, the tenants will be social housing tenants, because they come within clause 67, but the body in charge of them would not need to register, because the Minister has said that that is voluntary. What has happened to the Cave principle of single domain regulation, if there is a voluntary element to whether people register?

Iain Wright: That is an important point. I will set out the current regulatory regime, which has been in place for around 30 years. With the current system, there is a clear divide between housing associations, which almost exclusively developed social housing for rent, and private developers, who had almost no involvement in social housing whatsoever. The world has moved on. It has become somewhat murkier, in a positive sense, than the system established by the regulatory regime 30 years ago, particularly with the development of mixed tenure housing, which is central to the development of mixed communities and is something that I would like to see accelerated in years to come to secure high numbers of social houses and better standards.
In support of that, many non-profit providers are now developing market homes and using the proceeds to cross-subsidise their social homes. I suggest to the right hon. Gentleman that the Bill ensures that standards relating to social housing apply only to providers of social housing. On his specific question about those who are currently registered, I can tell him that those who are currently registered with the Housing Corporation will automatically be registered with the regulator. The Bill places exactly the same requirements on profit-making providers in respect of housing standards and standards for tenants, and the requirements are similar in other areas.
I propose tabling amendments to enable the regulator to set standards for financial management and governance of all providers, rather than current housing associations only, as well as amendments that will apply the moratorium regime to all providers. I do not think that there is a split or a two-tier system. We will have a single domain regulator in respect of social housing, with a clear intention, in terms of local authorities and ALMOs, that we will be moving towards that in two years’ time.

Nick Raynsford: I agree with my hon. Friend on the objective of having a framework that covers all providers, and I fully understand that existing housing associations will be required to continue to register under the new arrangements. What is not clear, which is the point that the right hon. Member for North-West Hampshire has raised, is what obligation there will be on private sector providers who choose to provide social housing as part of these mixed communities to register. If they simply decide not to register, will there be any sanction? If they do not register, how can the objective of a common domain set of standards irrespective of the landlord be achieved?

Iain Wright: In the previous sitting, we discussed the case of a philanthropic organisation that chose not to register. Such a decision might be strategic, because, for example, if the organisation provides houses for its employees, it might feel that it did not need to. All existing housing associations will be automatically registered, as per clause 241. Others may choose to register, and they are required to register if they wish to receive grant from the Homes and Communities Agency for rented housing. That relates to the Liberal Democrat amendment on being in receipt of public grant, which I resisted. The key point on receiving HCA grant for rented housing and the retention of ownership is that it may well be that an organisation builds houses and then passes on the ownership to a registered provider in order to manage them. That is the key test.

Nick Raynsford: I accept that entirely. Where a housing association is engaged in that process, it will, as under the current arrangements, undoubtedly be required to register. However, I cannot see any obligation on a private sector provider. As the Minister has suggested, we could get a more fluid market, with some private sector providers possibly providing an element of the social housing required under section 106, cross-subsidised by the profits from outright sale. In that case, there is no obligation in terms of a capital grant from Government, so what sanction or obligation is there to require the landlord to register? If a landlord does not register, how can we be sure that the tenants, who are effectively tenants of social housing, get the same protection and standards that are the objectives of the Cave report, which they would get if they were tenants of a landlord who was required to register?

Iain Wright: It depends on what the provider wishes to do. I reiterate that if they want to retain ownership of those homes, they will be required to be registered under the regulator. I hope that that clarifies the point. In a fluid situation in which we are moving away from the regulatory regime where housing associations provided social houses to a market for profit developers to provide market housing and greater fluidity, the regime that we propose will provide stability. I do not think that I have convinced my right hon. Friend so I will give way again.

Nick Raynsford: I understand that if a private provider receives a capital grant—a social housing grant, as it is now designated—for the provision of social housing, they will be required to register, which is absolutely right. What I do not see is what will happen if the private provider provides an element of social rented housing as part of a development that does not receive any capital grant in the form of a social housing grant, and where the subsidy comes either as a requirement of the local authority under section 106 or as a cross-subsidy from housing for outright sale. In those circumstances, housing for rent would, as I understand it, be occupied by people who were, to all intents and purposes, social housing tenants, but they would not get the same degree of protection, because the landlord would not be required to register with the regulator. I am unsure about that point, and I think that the right hon. Member for North-West Hampshire is equally concerned.

Iain Wright: I reiterate the point that new profit making providers can enter the market as a strategic organisational decision, because they receive a grant from the HCA. Certainly, if they wish to be the landlord, they must be eligible for registration. I would like to go away and consider the important question whether section 106 can be dealt with through planning policy and guidance. New profit making providers are not yet required to register, because they would benefit from section 106. However, the right hon. Gentleman has made an important point and I will look at it and write to the Committee.

George Young: This brief debate has raised an important issue. There will be two types of social housing tenants: those who come under the umbrella because of section 106 or because their landlords have registered, and those whose landlords have chosen not to register using the discretion mentioned on Thursday 24 January, Official Report, column 571, and who are in receipt of no public funds, either directly through capital grant or through section 106. It is clear that there will not be a single domain regulator for social housing tenants, which is perfectly acceptable, because there are perverse consequences to obliging everyone to register. However, it should be understood that one of the objectives of the Cave review will not have been achieved.

Question put and agreed to.

Clause 109, as amended, ordered to stand part of the Bill.

Clause 110

Local authority non-registrable bodies

Amendment made: No. 114, in clause 110, page 45, line 3, leave out from ‘regulations’ to end of line 4 and insert
‘defining when a person is controlled by an authority for the purpose of Exception 3.
(6) The definition may be expressed by reference to a definition for the time being given in a document identified by regulations under section 21(2)(b) of the Local Government Act 2003 (accounting practices for local authorities).’.—[Mr. Wright.]

Clause 110, as amended, ordered to stand part of the Bill.

Clause 111

Profit-making and non-profit organisations

Nick Raynsford: I beg to move amendment No. 61, in clause 111, page 45, line 28, at end insert—
‘(10) If the regulator thinks that what—
(a) is a non-profit organisation is considering becoming a profit-making organisation, or
(b) was a non-profit organisation has become a profit-making organisation,
it shall remove the body from the register and direct it to reapply for registration, subject to section 114.’.

Roger Gale: With this it will be convenient to discuss Government amendments Nos. 196, 219, 257, 258 and 302.

Nick Raynsford: We now come to the extremely important issue of the registration of profit-making organisations as opposed to non-profit-making organisations. Clause 111, as currently drafted, enables the register to designate a body as either a non-profit organisation or a profit-making organisation. There is no problem with that approach, which I entirely welcome. It is absolutely right that profit-making organisations can contribute towards housing needs, and if so, in my view, they should be registered, which was, of course, the subject of the debate on the previous clause.
It is important for the public to be aware of which category specific providers are in. That is provided for at the start of the registration process, because organisations have to designate themselves as either profit-making organisations or non-profit-making organisations. However, what will happen when an organisation changes its status? That issue is not purely theoretical, because subsection (9) clearly provides for a change in status. It states:
“If the regulator thinks that what was a profit-making organisation has become a non-profit organisation, the regulator must change the registered designation accordingly.”
There is explicit provision for circumstances in which a profit-making body changes to a not-for-profit body, but the Bill does not include a provision to cover circumstances in which an organisation changes, or seeks to change, its status in the opposite direction, from not-for-profit into profit-making.
When the issue came up in the second of the evidence sessions on 11 December, Official Report, column 40, the chief executive of the National Housing Federation pointed out that, because of the rules governing industrial and provident societies, it would be difficult for organisations to transfer from not-for-profit status to profit-making status. However, the possibility still exists, even if it is not easy, and Mr. Orr made it clear in his evidence that he thought that it would be a good thing if there were greater clarity. I agree, which is one of the reasons for this amendment.
The other reason why I tabled the amendment is the speculation that we are increasingly hearing about the possibility of housing associations converting into profit-making organisations. This is mainly a subject of the rumour mill, as David Orr said in his evidence to us in that session, but nevertheless, there are other straws in the wind suggesting that that might come about.
I recently read the annual report of one of the country’s largest housing associations, which opens with a clear description of how the organisation would like to be seen by the outside world:
“We are a property development and management company.”
There is no reference whatever to registered social landlords or to not-for-profit; it is a property development and management company. Another of its publications is its “Corporate Social Responsibility Report 2007”, which is admirable. It includes lots of references to doing things in the wider social interest, but it is written exactly as a company would produce its corporate social responsibility report and does not refer at any stage to its different status as a registered social landlord.
Straws in the wind suggest that some organisations would welcome the opportunity to transfer to a profit-making status, or at least to have a corporate structure that would allow them to do so. In those circumstances, it is in my view essential that there is absolute clarity about the status of organisations and the procedure to be followed, if there is to be any change in status. The situation must be transparent, because it would be quite wrong for there to be scope for an organisation to change its status and for the process to involve no explicit recognition that that change of status has taken place. That is the purpose of the amendment.

Lembit Öpik: My understanding is that the right hon. Gentleman believes that there is no restriction on an organisation that starts off as a non-profit organisation becoming a profit-making organisation yet retaining the beneficial status that it began with as a non-profit-making organisation. Am I right in my understanding of what he thinks the legislation would allow?

Nick Raynsford: Clearly, a great deal would depend on the formal status of the organisation. Most registered social landlords are either industrial and provident societies or companies limited by guarantee rather than companies that distribute shares, so there would have to be a change of company status. We are dealing with a much more complex world, where some large housing associations have stocks of 50,000 or 60,000 properties and have clear distinctions between different divisions. Some of those are doing outright work for sale, some are doing shared ownership and low-cost home ownership and others are focusing purely on social housing. It is not difficult to foresee the creation of a structure in which some parts of an organisation are clearly profit-making. There is definitely a restriction in the case of charities, as charity law would preclude that, but not all housing associations are charities, so one of the issues would be the status of the organisation. David Orr, in his evidence to the Committee, said that it is not easy for an industrial and provident society to change, which I recognise, but he acknowledged the element of doubt, which is why he agreed on the need for clarification.
The amendment would require the regulator, in the event that the regulator believes that an organisation is either contemplating changing its status or has actually done so, to require the organisation to deregister and to apply again to re-register as a profit-making body. That would achieve clarity and certainty, and it would ensure that all interested parties—tenants, partners and the local authorities in whose area the association operates—were aware of the change. Those parties would have an opportunity to comment, and the regulator would obviously take account of those comments before deciding whether to re-register the body. That would provide a proper safeguard, which is the purpose of the amendment.
Since the amendment was tabled, the Minister has introduced a group of amendments that seek to address the issue, albeit in a different way, and that in some ways go further than my amendment. Amendments Nos. 196, 219, 257 and 258 would prevent a registered body from deregistering or disposing of its assets, if the regulator believes that the purpose is to allow it to distribute profits, which is an important safeguard. Similarly, amendments Nos. 257 and 258 would prevent the regulator from agreeing to a change of rules, either for an industrial and provident society or a company, if it believes that that would make the organisation a profit-making company.
As I have said, the Government amendments go further than mine in some respects, and I welcome the Government’s recognition that there was a lacuna in the Bill. However, the Government amendments do not appear to allow an organisation registered with the regulator to change from not-for-profit to profit-making status, although the Bill allows the move in the opposite direction, as I have described. If the Government amendments will prevent any possibility of a move from profit-making to non-profit-making status, the safeguard is satisfactory, in which case I will willingly seek the Committee’s leave to withdraw my amendment.
I do not want to leave any element of doubt around the subject. As I stressed on Second Reading, any suggestion that housing associations may easily convert from their current not-for-profit status into profit-making and profit-distributing companies could have a profound and unhelpful impact on the development of the pluralist framework of social housing providers that the Bill supports and that has contributed enormously to the improvement and condition of the social housing stock in recent years.
The hon. Member for Welwyn Hatfield has repeatedly criticised the Government about the number of new social homes that are built, but he has been silent about the huge improvement in the condition of the social housing stock in the past 10 or 11 years. When the Government entered office, there was a shameful and huge backlog—£19 billion-worth—of substandard council housing, which was the product of years of neglect and underfunding. Tackling that backlog through the decent homes programme, the stock transfer programme and the creation of ALMOs, thereby securing huge improvements in the living conditions of millions of people and improving the quality of properties available for letting, has been one of the Government’s proudest achievements.

Grant Shapps: The right hon. Gentleman has referred to something that I never spotted in our debates—the idea that we believe that less social housing should be built. In fact, he knows that my point is that more social housing was built under us than in every single year under this Government. The argument is not about the quality of social housing, although if he wants to debate that subject I can produce figures showing a 15 per cent. improvement through the decent homes standards, when the amount of money spent suggests a far better outcome was possible. Will the right hon. Gentleman accept that the problem with the approach of target-driven decent homes standards, is that in some cases the wrong standards have ended up being the outcome?

Roger Gale: Order. That was a terribly good speech. The hon. Gentleman and the right hon. Gentleman may think that I have not noticed that we are drifting away from the substance of the amendment; I have noticed.

Nick Raynsford: I shall not rise to the bait. I was making the point that in his repeated comments about the number of social housing units produced, the hon. Member for Welwyn Hatfield has fallen into same trap as many politicians in the 1960s, ’70s and ’80s of forgetting the issue of quality. Poor quality social housing has been a real problem, and it has been addressed by RSLs, ALMOs and the decent homes programme. The relevance to the amendment is that that pluralist framework is threatened by the campaigning of those who say that any change in the status of council housing, from council housing to an ALMO or an RSL, is essentially privatisation, which generates fear and anxiety on the part of tenants. There must be clarity, and there should be no allowance for that kind of propaganda, which can have a damaging effect on the programme for improving the quality of the housing stock.
That is why I have moved the amendment. I hope that my hon. Friend the Minister will give me the assurance that I seek, in which case I shall be happy to withdraw it.

Roger Gale: Order. As this is a matter of written record and written records do not convey inflection, when I said that it was a very good speech, I should make it plain that I was commenting on the longevity, not the content.

Iain Wright: My right hon. Friend raised the issue on Second Reading, when he highlighted the importance of not opening the door to existing RSLs converting from not-for-profit to for-profit status. He asked us to re-examine the matter, which, as he is aware, I have done.
My right hon. Friend has graciously said that I have gone further than his amendment. Currently, only non-profit bodies can become RSLs, and they are largely limited in their ability to pay dividends. They cannot distribute profits and, importantly, they cannot ensure that valuable assets and lucrative revenue streams are not diverted away from the social objectives of the organisation. This morning, we have already discussed how we want to see a plurality of different providers to ensure that we have a well-maintained and greater number of social houses.
I was very struck by what David Orr, chief executive of the National Housing Federation, said during his oral evidence session. He said that the
“Bill as written makes it clear that private sector providers of social housing will be regulated only in respect of social housing. That is proper.”——[Official Report, Housing and Regeneration Public Bill Committee, 11 December 2007; c. 33.]
I absolutely agree with that, but I would go further and suggest that the position of the existing regulator for social stock is very different. As I said, such stock is almost wholly owned by registered social landlords, and grant has been provided in the full knowledge that they are bodies primarily concerned with housing, and that surpluses will be re-invested for the purposes of more social housing. That has been a very clear understanding when grant has been applied for, and we need to ensure and establish arrangements that protect and maintain that historical understanding.
Let me make it plain that I do not want non-profit providers to be able to distribute surpluses from past investments. I want to see the charitable or social character of RSLs—now called in the Bill non-profit providers—maintained. I would suggest that the amendments that I have tabled today bring that about and ensure strict separation from profit-distributing organisations. I recognise the very great temptations that some RSLs will have to convert to profit-distributing organisations. However, that seems to me, in policy and moral terms, to be wholly wrong. I have nothing against partnership working with regards to for-profits, and I have mentioned time and time again, not least this morning, that I am keen to see a greater degree of for-profits involvement in the provision and delivery of social housing. However, that new and exciting era must be based on rigorous grant conditions and rigorous regulation, rather than it being incumbent on RSLs trying to exploit changes in legislation for their own personal gain. I think that members of RSLs and their staff clearly have no right to expect to be able to benefit in this way from asset or product distribution, and I have introduced these amendments to prevent that from happening in future.
Let me put it on the record that I agree with the sentiments expressed by my right hon. Friend in amendment No. 61. I think that they try to achieve exactly the same objectives that I am trying to achieve. However, with the greatest of respect—I am tentatively trying to chide my right hon. Friend here—I do not think that they go as far as I do, and I do not think that they have the intended effect. Let me point out to the Committee the phrase in amendment no. 61:
“If the regulator thinks that what—
(a) is a non-profit organisation is considering becoming an profit-making organisation, or
(b) was a non-profit organisation has become a profit-making organisation,”—
this is the key point—
“it shall remove the body from the register and direct it to reapply for registration”.
I think that that could bring about loopholes in the system, and I do not want to take the risk, even if it is a temporary risk, of where a body is deregistered, we thereby lose the powers to regulate it before it comes back to be re-registered. In that respect, I understand my right hon. Friend’s intentions, but I ask him to withdraw his amendment.
The amendments tabled in my name are aimed at reducing the pressure that the regulator might otherwise come under from non-profit registered providers to allow them to turn into profit-making, profit-distributing bodies, by removing the discretion that the regulator would otherwise have to permit such changes.
Amendments Nos. 196, 219, 257 and 258 amend clauses 115, 162, 188 and 190 respectively. They thus amend the key powers that ensure that social housing is managed in line with a social and charitable objective by registered providers that are charities, industrial and provident societies, and other companies, and continue to meet these objects, especially housing objects. In particular, it should not be possible for non-profit providers to distribute assets, especially those that have been funded by contributions from the taxpayer through grants.
Under clause 115, the regulator has discretion to allow a registered provider’s request to deregister. I would suggest that the first subsection in amendment No. 196 prohibits the regulator from agreeing to deregister a non-profit registered provider if he thinks that distribution of the assets is the reason why deregistration is being sought.
The second subsection of amendment No. 196 would apply whenever the regulator was considering whether to grant a request to deregister by a registered provider. It requires that any conditions that the regulator has placed on disposals of land, for example, relating to the use of disposal proceeds, and any conditions of grant made by any grant funder, such as the Homes and Communities Agency, should be taken into account before deciding whether the organisation can be outside the scope of regulation.
If a registered provider has not used disposal proceeds as required by the regulator or failed to repay grant as required, the regulator might be more reluctant to permit it to deregister and escape further regulatory intervention. In that respect, I hope that I have gone further than my right hon. Friend suggested.

Nick Raynsford: As the Minister has said, and as I conceded in my opening speech, his amendments would go further than my amendment in a number of respects. However, I seek clarification in one area of uncertainty. Is it possible, even with the hon. Gentleman’s amendments, particularly the latter two in respect of the rules and status of industrial and provident societies and companies, to convert from being a profit-making body to a non-profit-making body? As drafted, the Bill clearly allows the opposite.
Subsection (9) provides explicitly for circumstances in which a profit-making body becomes a non-profit-making body. Even with the amendments, would it still be possible for a non-profit-making organisation to change status and become a profit-making organisation? Would it be able to get through all the hoops that my hon. Friend has set? Moreover, could the organisation do so if it argues that the purpose of that change is not to distribute profit but enable it as a private company to raise money more effectively on the open market than it could as a non-profit body?

Iain Wright: I am aware that the Committee wants to make progress and I am tempted to give my right hon. Friend the Member for Greenwich and Woolwich the short answer. However, at the risk of incurring wrath, I shall give the long answer.
I come to amendments Nos. 219, 257 and 258. The short answer is yes. I am certain that the amendment would close the loopholes. Amendment No. 219 has the same purpose as amendment No. 196, but could be used to prevent a disposal of assets. It would have the effect that disposal consent may not be given to a non-profit registered provider if the regulator believes that consent is being sought to enable disposal of assets to members.
Clauses 188 and 190 require the regulator’s consent for changes to the constitutions of non-profit providers that are either industrial and provident societies or companies. Amendments Nos. 257 and 258 prohibit the regulator from agreeing to any such changes that would turn a non-profit provider into a profit-making body that could thus distribute significant dividends and/or profit. Clauses 188 and 190 render such rule changes or changes of articles without the regulator’s consent ineffective. I can confirm that the amendments would prevent non-profit organisations becoming for-profit organisations. However, going the other way, I am happy for for-profit organisations to become not-for-profit organisations if that is the strategic objective of a particular organisation.

Andrew Love: I thank my hon. Friend the Minister for his explanation. He dealt with the constitutional arrangements and the discussions between the regulator and the particular RSL that wants to convert to profit. However, as my right hon. Friend the Member for Greenwich and Woolwich said, tenants have expressed considerable concern about transfer. Hon. Members have tried to reassure tenants that, when they transferred to an RSL, they were not transferring to the private sector. If my hon. Friend the Minister allows such proposals to go ahead, we would, in effect, be breaking the promise that was made to the tenants that they would not end up in the private sector. Can he give those tenants some reassurance?

Iain Wright: I hope that I can. As I said, I do not want RSLs to convert to profit-distributing organisations, whereby people can have good share options. I find that absolutely abhorrent in the social housing sector. People could get flash cars as part of the share options, and so on. We must be careful and make sure that RSLs, or not-for-profit providers under the Bill, have a clear status. They are not public sector bodies for the purposes of public sector classification. They will be able to provide and draw on loans and borrowings from the private market to improve and facilitate the building of social housing. That is clear and it is important that we get that message across. I would like hon. Members on both sides of the House to ensure that it is clear to tenants, who may be worried about terminology such as profit and for-profit, that we are ruling out categorically the idea that chief executives and chairs of such organisations can have stock options. That is abhorrent, we do not want to see it and I hope that the hon. Gentleman will take that message from the Committee.

Nick Raynsford: I am grateful to my hon. Friend for his assurances. I particularly note that he does not want to see RSLs converting from their current not-for-profit status to profit-distributing companies, and I note his assurance that with his amendments there would be no scope for RSLs to convert to profit-making and profit-distributing status. With that reassurance and the reassurance that he has given my hon. Friend the Member for Edmonton about the consultation with tenants, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 111 ordered to stand part of the Bill.

Clause 112 ordered to stand part of the Bill.

Clause 113

Fees

Question proposed, That the clause stand part of the Bill.

George Young: This clause gives the regulator power to levy fees. Before I go any further, it would be helpful if the Minister would indicate whether this is modelled on any existing legislation. My understanding is that the Housing Corporation does not require housing associations to register, so the costs involved in clause 113 are not costs that housing associations currently have to bear. If one was unkind, one could call this a stealth tax because housing associations are not-for-profit social businesses, as we have just heard; they re-invest their surpluses into the community and their rents will be controlled by the Government and the regulator. That means that rents paid by tenants would either have to increase in order to pay the fees that are proposed under clause 113, or existing income would be moved away from service provision to pay for regulation, or associations might build fewer homes. The estimated cost of £20 million amounts to a charge of about 20p per week per property, which, I am advised, could be used to build 7,000 homes a year.
I looked through the comprehensive impact assessment for the Housing and Regeneration Bill to see whether I could find where the impact of the clause was dealt with. I now know what the Minister was doing on 9 November. On 9 November he was reading every page—there are 248 of them—of the impact assessment and then signing:
“I have read the Impact Assessment and I am satisfied that (a) it represents a fair and reasonable view of the expected costs, benefits and impact of the policy, and (b) the benefits justify the costs.”
Confident that the Minister is more than familiar with the document, I wonder whether he will indicate where the impact of clause 113 appears. I looked on page 104, which has the impact assessment for implementation of the Cave review of social housing regulation, and a wide variety of impacts are assessed, including competition, small firms, legal aid, sustainable development, carbon assessment, other environment, health impact, race equality, disability equality, gender equality, human rights and rural proofing, but nowhere could I find where it said what the impact would be on tenants. I may have overlooked it; it may be on a page that has escaped my attention. I see that the Minister is doing just what I have been doing over the last 20 minutes, which is trying to find it. Will the Minister say whether this is a new power, how the housing associations will pay for it and how it meets the obligations of the regulator? I see that, on page 122, those obligations include to
“reduce and manage the burden of regulation”.
This seems to be a new burden on housing associations. Will he say where, in the comprehensive briefing that we have been sent on the Bill, the impact of clause 133 appears?

Lembit Öpik: I have one slightly different concern. Once fees are introduced, that introduces the prospect of a body being regarded as a profit centre rather than an administrative organisation. There is precedent for that. The Civil Aviation Authority is required by the Exchequer to make a return on its activities. Given that the Civil Aviation Authority is primarily there as a safety regulator, it has often struck the general aviation community as unreasonable that the CAA returns what amounts to a profit to the Exchequer for its safety work. What assurance is there that the Government or the Exchequer will not be tempted to require some kind of return from this organisation, thereby making its entirely valid and justified regulatory activities into an unjustified profit centre?

Iain Wright: I confirm to the right hon. Member for North-West Hampshire that this is modelled on modern regulatory regimes. It is fair that the costs of regulation should be borne by those who are regulated. That happens in the utilities sector and we propose a change in the current regulatory regime so that it also happens in the social housing sector.

George Young: The Minister has mentioned that it is modelled on what happens at the moment. Do housing associations pay a fee like that to the Housing Corporation?

Iain Wright: No they do not. We are moving away from the current situation to take into account the wider regulatory principles that are, as I said, that the costs of regulation are borne by those who are regulated. That is consistent with the Cave review. Martin Cave proposed that the regulator should raise money to cover its running costs from regulated bodies, and I will return to the point made by the hon. Member for Montgomeryshire with regard to that matter.
I am anticipating a debate on this issue during this sitting, and I suggest that the approach will make the new regulator more independent from Government, as it will be responsible for its own funding. It will help put pressure to make costs move downwards and be more efficient. Those who are being regulated will want to ensure that it is providing real value for money. The right hon. Gentleman has said that at the moment, regulation costs about £20 million per year. That is the regulatory part of the Housing Corporation and it amounts to about £10 per social home per year. That is good value for money, and the new regulator will probably drive down costs even further.
I draw the attention of the right hon. Gentleman to clause 113, in particular subsection (7) where it says that the regulator must prepare and publish the principles under which fees must be set and consult on them. It says:
“In preparing (or revising) the principles the regulator shall consult—
(a) the Secretary of State, and
(b) persons appearing to the regulator to represent the regulator to represent the interests of fee-payers.”
That point is important and addresses the issue raised by the hon. Member for Montgomeryshire. This is not meant to be some sort of profit centre. The Treasury will not expect a rate of return from the regulator. It is meant to cover costs of regulation as opposed to the regulator’s other activities. Clause 113(6) says:
“The principles may provide for specified expenditure or potential expenditure under section 94 or otherwise to be disregarded for the purpose of subsection (5)(a).”
It is not supposed to provide revenue for the Treasury; it is to cover the costs of the regulator.

Lembit Öpik: For the avoidance of doubt, can the Minister confirm that there is no intention, and that it will never be an intention of his Administration to seek to secure return for the Treasury from the activities of the regulator?

Iain Wright: It is difficult to say never Mr. Gale. Should a circumstance arise whereby the Treasury wanted to make some sort of return—I draw on my earlier point about the regulator—given that we are trying to minimise unnecessary regulation and bureaucracy, and make sure that costs are driven down so that more resources are available for the provision of higher standards in social housing, I imagine that a huge hue and cry would be made. I cannot anticipate circumstances in which the Treasury will want a rate of return because the whole point is that the regulator will be covering costs.

Lembit Öpik: I will not pursue the matter further, but that is exactly what I was afraid of. The CAA has to deliver a return to the Treasury. I am concerned that the regulator will also have to do so. I accept that the Minister does not want to cause himself trouble with the Treasury, so it seems best if I pursue the matter through a series of parliamentary questions to the Treasury.

Iain Wright: I reiterate what I said earlier. It is not our intention that the provision will be a revenue-raising exercise. It is meant to cover costs. I am disappointed that I cannot reassure the hon. Gentleman further, but the principle is clearly such that the regulator receives its income from those that it is regulating and, at the moment, there are absolutely no plans to make sure that there is a rate of return in that regard.

George Young: I asked the Minister a specific question that he has not as yet answered. Whereabouts in the impact assessment does the impact of the measure feature, given that it is of importance to tenants?

Iain Wright: I draw the right hon. Gentleman’s attention to page 117 of the impact assessment, where reference is made to the costs to regulated bodies in terms of the Housing Corporation currently spending
“around £20m pa on regulating RSLs.”
It also states:
“In moving to the new regulatory regime a stand alone Regulator will need to adapt its approach and skill mix. On the basis of the existing cost of regulation this is estimated at an additional £2.8m, and would deliver cost savings in the long term.”
I hope that that deals with the right hon. Gentleman’s concern. As for my having a busy 9 November, I read a substantial part of the information before that date, which is when I signed the impact assessment.

Question put and agreed to.

Clause 113 ordered to stand part of the Bill.

Clause 114

Proposals: effect

Iain Wright: I beg to move amendment No. 191, in clause 114, page 46, line 42, at end insert—
‘( ) After removing a body under subsection (1)(a) or (b) the regulator must take all reasonable steps to notify the body.’.

Roger Gale: With this it will be convenient to discuss the following:
Amendment No. 106, in clause 115, page 47, line 5, at end insert ‘or’.
Amendment No. 107, in clause 115, page 47, line 6, leave out paragraph (b).
Government amendment No. 192 to 195 and 197.

Iain Wright: The amendments clarify the general processes of compulsory deregistration under the clause or requests for voluntary deregistration under clause 115. Provision for deregistration under the clause is based on that in sections 4 and 5 of the Housing Act 1996, which allows the Housing Corporation to deregister RSLs. Amendment No. 191 requires the regulator to inform a body that it has been compulsorily deregistered. It should be remembered that compulsory deregistration is at the regulator’s discretion. It may take place only if the provider has effectively ceased operation as a social landlord, having either ceased to carry out activities or ceased to be eligible for registration—if it no longer provides or intends to provide social housing in England, for example. If the provider does not already know that, it would be informed by the regulator as a result of amendment No. 191 that it no longer has to comply with regulation.
When a provider seeks deregistration, amendments Nos. 192, 193 and 197 replace paragraph (c) of subsection (2). Rather than the regulator being able to deregister a body simply on some other grounds that seem to the regulator to make deregistration appropriate, the regulator will be able to permit deregistration if the provider meets relevant criteria set by the regulator. That has the effect that the regulator must establish a policy in advance of considering cases rather than responding to each on an ad hoc basis. Amendment No. 197 requires the regulator to publish such criteria.
In addition, amendments Nos. 194 and 195 introduce a degree of discretion about consultation with local authorities on requests for deregistration. It would not generally be necessary for the regulator to consult each local authority in whose area the registered provider acts. The amendments mean that the regulator need not consult all local authorities in whose area the registered provider acts, only those that it considers appropriate. For example—and this is important—if a registered provider owns only two or three homes in each of several districts, and the vast majority of its stock is elsewhere, the regulator may decide that it would be appropriate to consult only those local authorities where the provider has a more significant presence.
Amendment Nos. 106 and 107 would remove the regulator’s discretion to deregister a body on the grounds that it is regulated by another authority whose control is likely to be sufficient.
Under the current regime, only a few, very small RSLs have deregistered, such as some alms houses. I would suggest that regulation can be a major burden on bodies that operate on a very small scale, and we are committed, as I have said time and time again, to reducing regulation for good providers. Deregistered bodies remain subject to restrictions on disposals, and tenants must have access to the local housing ombudsman. These are the basic tenants’ protections, but the regulator is perhaps more likely to retain such bodies as providers and to set a very low level of regulation for them because of the greater emphasis on a light touch, and on risk assessment in terms of regulation.
In short, the circumstances are limited, and likely to be used only rarely. It is implicit that the effect of deregistration on this test would be very largely deregulatory, and that there should be no loss of tenants or stock protection. If there were, that would be unlikely to meet the regulator’s fundamental objectives. On that basis, I hope that the Committee will accept the Government’s amendments and not insist on amendments Nos. 106 and 107.

Lembit Öpik: Our amendments are designed to test the working of the Government’s approach to the matter. I have two questions to raise. I accept that I am busking a little, but I was not paying particular attention to my own thoughts. My two macro-questions relate to two matters. First, the perennial concern of the housing associations is one of potential over-regulation. Secondly, the relationship between profit and non-profit making organisations is a recurring theme. To some extent, we have covered some of that already, so I shall reduce my questions to one point. Can the Minister provide some assurance—given that we have referred to the regulatory impact assessment before—that the burdens that have been put on organisations that are necessarily very small-budget and do not have huge administrative resources, have been considered in the round?

Iain Wright: I hope that I made it clear, when I moved my own amendments, that we are very keen to ensure that the new regulatory regime has a light touch: it is focused on areas of major concern. Those small RSLs would be, I imagine, not classed as high-risk, and the level and burden of regulation would be shared accordingly. On that basis, I understand what the hon. Gentleman is saying, but I hope that he will not press his amendment.

Lembit Öpik: It is not clear exactly who decides what is high-risk and what is not. If one looks at how these are phrased, my madness scenario is something that we see time and time again. When something goes wrong out there and there is a scandal or financial irregularity that occupies the Sunday papers, and a few weeks’ worth of headlines, the Government feel an obligation to react. I could see a dramatic response, on a wholesale basis. If the problem relates to housing, the response would be, “We, the Government, have now decided to tighten this up”, or “We have issued an edict to the regulator that all of these individual organisations have to provide a certain additional body of evidence.” That is expensive, time-consuming and probably not very cost-effective. My personal judgment is that we ended up with gun regulation legislation in this country as a knee-jerk reaction to what happened in Dunblane. No one is likely to get killed in the housing environment, but one can perceive the same kind of very high-profile issue resulting in the over-importance of regulation. The Minister needs to give me an assurance that there is not, in his judgment, a risk of a knee-jerk reaction in the same way. That is what I meant to say earlier on.

Iain Wright: I disagree with the circumstances that the hon. Gentleman outlined because I do not think that a scandal, to use his words, emerges or flares up without any warning. One of the true strengths of the regulatory regime that the Bill will put in place is that the risk factors, the traffic lights—for want of a better term—will be used appropriately and we will not have any heavy enforcement of regulation; it will be based on risk, loss to the public purse and risk to reputation. On that basis, I do not accept the hon. Gentleman’s premise. The regulator will have a light touch and will intervene where necessary, but these things do not flare up immediately. In terms of what the regulator will have to do with regard to objectives in clause 86, which we have already discussed, there must be a balance and we have got it about right. I cannot anticipate what the hon. Gentleman is suggesting, so I hope that he will not press his amendment.

Amendment agreed to.

Clause 114, as amended, ordered to stand part of the Bill.

Clause 115

De-registration: voluntary

Amendments made: No. 192, in clause 115, page 47, line 7, at end insert—
‘(ba) on the grounds that the registered provider meets any relevant criteria for de-registration set by the regulator.’.
No. 193, in clause 115, page 47, line 8, leave out paragraph (c).
No. 194, in clause 115, page 47, line 10, leave out ‘any local authority’ and insert ‘such local authorities’.
No. 195, in clause 115, page 47, line 11, at end insert ‘as it thinks appropriate.’.
No. 197, in clause 115, page 47, line 15, at end insert—
‘( ) The regulator shall publish criteria set for the purposes of subsection (2)(ba).’.—[Mr. Wright.]

Clause 115, as amended, ordered to stand part of the Bill.

Clause 116 ordered to stand part of the Bill.

Clause 117

Appeal

Lembit Öpik: I beg to move amendment No. 332, in clause 117, page 47, line 30, leave out ‘to the high court’.
I rise with what remains of my focus and concentration, to put forward my views in an erudite and non-waffly fashion, for the benefit of the Committee and the Minister. I am grateful for the moral support of hon. Members. I feel as if I have arisen from a deep sleep to consider clause 117.

Iain Wright: The hon. Gentleman is with the Liberal Democrats.

Lembit Öpik: That was not very nice of the Minister, but I am sure that he said it with the warmth I normally associate with his rapier-like wit.
The purpose of the amendment is to probe the potential cost of a body appealing through the High Court against the decision of the regulator, when it has decided to refuse to register that body, to de-register it or to refuse to de-register it. In other words, are we entering a situation of overkill by requiring the High Court to be the arbiter of an appeal? That will be fine for large organisations with a multi-million pound turnover and organisations with their own legal advice, but many of the organisations we are discussing are collections of individuals with an altruistic intent to resolve local housing problems. It would be colossal expenditure for them to appeal to the High Court against the decision of the regulator, a regulator that necessarily will have extensive resources at its command and will effortlessly be able to mount a defence of the decision that is taken. For smaller organisations, which amount to no more than a couple of individuals on occasion, the decision of the regulator is likely to stand because the organisation will be unable to afford to mount a defence through the High Court.
I have not proposed an alternative appeal process. There are of course a number of different ways of doing it, but I suggest that either the Government make it clear that those organisations will in some way be financially supported in making their appeal, or that we should seek a less expensive way of doing it. We all want an appeal process and we want to it to be fair. In my judgment, using the High Court is de facto unfair for small organisations because they cannot afford to launch a defence.
Finally, let us think about a situation in which a body appeals against the regulator, spends many thousands of pounds in that appeal and loses. That would involve tremendous opportunity costs in terms of the money spent on the appeal, so it is very likely that those who make the financial decisions within such organisations will be loth to take the risk. They will say, “We don’t like this decision, but it is cheaper and less risky to go with it than to find alternative ways of doing what we want to do, even if that restricts our room for operation.” In conclusion, will the Minister tell us why he feels that an appeal to the High Court is a proportionate system and one that is affordable to the many small organisations under consideration?

Iain Wright: I disagree with the amendment on two grounds. From the hon. Gentleman’s comments, it sounds as if this is a new power, but it is not. Section 6 of the Housing Act 1996 provides for an appeal to the High Court against the Housing Corporation’s decision on registration and deregistration. Clause 117 similarly provides a right of appeal. A body may be unhappy with the regulator’s decision not to register it. On that basis, therefore, it is right and proper that we have an appeals process. As the hon. Gentleman said, he is not proposing an alternative body to which such an appeal should be made, so I was not entirely certain what he was trying to achieve with the amendment, other than a general cutting down of costs.
The appeals procedure is very important for the deregistered provider. On that basis, I cannot accept an amendment that would leave providers’ right of appeal so unclear. However, I feel sorry for the hon. Gentleman and somewhat guilty that I criticised his membership of the Liberal Democrats so I want to make amends. If the hon. Gentleman—I am trying to tempt him—wanted to suggest that the appeal process should be linked to some sort of tribunal, as suggested in the Cave review, that is something that I could take away and discuss with the Tribunals Service, the Ministry of Justice and others. I hope, therefore, that the hon. Gentleman will withdraw his amendment and allow me to make progress in the manner I suggest.

Lembit Öpik: We see once again, writ large before us, a Minister who is the exemplary form of an iron fist in a velvet glove. His fundamental disagreement sounds more like a practical objection. He rightly assumes that I envisage some kind of tribunal process. No doubt he is also aware from where my probing amendment is derived.
I am grateful for the Minister’s willingness to consider the tribunal approach, which I honestly think is a much better approach whether or not there is a precedent in past legislation. Had he and I been doing business in 1996 in this same Committee, I would have made the same point, so given his assurance, I do not feel any need to move the amendment to a vote. More than anything, if we can achieve a constructive outcome from the discussions about the tribunal, that would be appreciated not just by me but by the handling organisations whose concerns I have put forward. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 117 ordered to stand part of the Bill.

Clause 118

Payments to members etc.

Question proposed, That the clause stand part of the Bill.

Roger Gale: With this it will be convenient to take new clause 4—Payments and benefits to officers and employees of housing associations—
‘(1) Paragraph 2 (Payments and benefits to officers and employees, &c) and paragraph 3 (Maximum amounts payable by way of fees, expenses, &c) of Schedule 1 of the Housing Act 1996 (c. 52) are hereby repealed.
(2) The Secretary of State shall introduce regulations incorporating a code of conduct for registered providers which deal with payments and benefits to officers and employees of housing associations.
(3) Before introducing the regulations the Secretary of State shall consult with the Regulator of Social Housing, the Charity Commission and any body which appears to the Secretary of State to represent the interests of registered providers.’

Grant Shapps: This morning, the right hon. Member for Greenwich and Woolwich referred to the extent to which housing associations have the capacity almost to morph into a different type of organisation. He may have been reading from the annual report for “Places for People” when he said that the particular housing association did not refer to itself as a social provider, but as a developer or builder, possibly from a large corporate background with all the associated culture.
New clause 4 would recognise that housing associations are in a special category of their own and that when the Bill considers payments for members, it should take into account the aims and objectives of the housing associations. In particular, it should consider setting up a code of conduct that the Secretary of State would invoke, under the new clause, by getting together with the relevant parties, in particular bodies such as the Charity Commission. Through consultation with the social regulator, it would come up with a code of conduct to ensure that the slippage—the movement to which the right hon. Member for Greenwich and Woolwich referred—does not become a tidal wave.
It is possible to envisage a situation where there would be a shift towards corporate housing associations—we are already seeing housing associations gain upwards of 100,000 properties and become super-development companies. The Committee has rightly expressed concern that if that process continues we may have a very different form of housing association in years to come. The purpose of new clause 4 is to provide some limits and an additional framework in those circumstances. I hope that the Minister will carefully consider the Secretary of State’s ability through the legislation to consider payments and benefits to officers, to try to prevent an avalanche of housing associations turning into nothing more than corporate developers operating as they do in the private sector.

Iain Wright: I have a lot of sympathy with what the hon. Gentleman is trying to do. I pay tribute to the manner in which he has outlined his case. As he said, the new clause would provide for a code of conduct covering payments and benefits to officers in place of existing statute. The Government share his aim, which they agreed to following the 2006 Elton review. However, I suggest that the same outcome could be achieved in the Bill without the new clause, and arguably in a less centralised manner.
With clause 118, we are repealing paragraphs 2 and 3 of schedule 1 of the Housing Act 2006, for England. Clause 63 ensures that schedule 1 will apply only to Wales. The Bill reintroduces some parts of the schedule; for example, paragraph 1 comes in as clause 118, but paragraphs 2 and 3 do not.
The regulator may set standards on payments and benefits in clause 174, following consultation. It could choose not to do so if it trusts the sector to get it right and wants to minimise burdens. The Secretary of State will not be able to direct on those measures, and I anticipate a fierce debate about the role of the Secretary of State with regard to directions and standards when we debate clause 173. We do not think it necessary or appropriate to give the Secretary of State a role in relation to such standards, given the greater independence we envisage for the new regulator. That is a fundamental point and we must protect the regulator’s independence as much as possible.
The regulator will be explicitly permitted by amendment No. 238 to clause 178 to set standards referring to documents produced by others, such as a code of conduct produced by the sector. If the regulator wanted the standards to follow a code of conduct, it could set standards accordingly, but that would be a matter for the regulator not the Secretary of State.
The new clause leaves an unfortunate gap in regulation in Wales, as it would repeal paragraphs 2 and 3, which are concerned with Wales, without providing for an alternative. I doubt that is what those tabling the amendments, including the hon. Gentleman and the Welsh Assembly Government would want. I have sympathy with the argument, but I hope that the hon. Gentleman will recognise the central thrust of my argument—that we are trying to move away from centralised diktat from the Secretary of State that is in nobody’s interests with regard to the new regulatory regime. On that basis, I hope that he will not move new clause 4.

Grant Shapps: I am grateful for the Minister’s response, in particular the admission that he recognises the problem that new clause 4 seeks to correct, or prevent. I am also satisfied with his explanation of how the Bill might help to deal with those issues. As he has put on the record his agreement with the principles, if not the wording, of the new clause, I ask leave to withdraw the motion—oh, I do not need to.

Roger Gale: There is no need to withdraw the motion because it has not been moved, but I will take what the hon. Gentleman says as an indication that he does not wish to move the motion formally when we reach it.

Question put and agreed to.

Clause 118 ordered to stand part of the Bill.

Clause 119 ordered to stand part of the Bill.

Clause 120

Complaints

Iain Wright: I beg to move amendment No. 198, in clause 120, page 49, line 8, at end insert—
‘“Housing Corporation”
“Regulator of Social Housing”’.

Roger Gale: With this it will be convenient to discuss Government amendments Nos. 199, 304 and 306.

Iain Wright: These are minor and consequential amendments. They will make sure that clause 120 has the desired effect, which is to require registered providers to be members of the housing ombudsman scheme, as RSLs are at present.
Amendments Nos. 198 and 199 make further changes to schedule 2 to the Housing Act 1996 to remove references to the Housing Corporation and replace some of them with references to the regulator of social housing.
Amendments Nos. 304 and 306 simply add to the schedule of provisions to be repealed the references to the Housing Corporation in schedule 2 to the Housing Act 1996 and schedule 16 to the Government of Wales Act 1998, which are to be omitted by amendment No. 198.
The amendments are very technical and very minor. On that basis, I hope that the Committee will accept them.

Amendment agreed to.

Amendment made: No. 199, in clause 120, page 49, line 8, at end insert—
‘( ) In paragraph 11(4) of Schedule 2 to that Act (grants), omit—
(a) “or the Housing Corporation”, and
(b) “or, as the case may be, the Housing Corporation”.’.—[Mr. Wright.]

Question proposed, That the clause, as amended, stand part of the Bill.

George Young: The clause carries forward the housing ombudsman, and we are all pleased to see that. What will happen, however, when we reach our goal of having a single domain regulator, and local authority housing comes under the regulator’s remit? Will complaints by local authority tenants continue to go to the local government ombudsman, while complaints by housing association tenants will go to the housing ombudsman, or does the Minister envisage some harmonisation of the ombudsman service?

Iain Wright: I anticipate that the former suggestion will be the correct one and that matters regarding housing will be subject to scrutiny by the local housing ombudsman. Having said that, the situation is fluid, and we will certainly explore it as we move forward over the next two years. However, that is certainly how I currently anticipate that things will be.

Question put and agreed to.

Clause 120, as amended, ordered to stand part of the Bill.

Clauses 121 and 122 ordered to stand part of the Bill.

Clause 123

directions

Lembit Öpik: I beg to move amendment No. 77, in clause 123, page 49, line 25, leave out ‘non-profit’.

Roger Gale: With this it will be convenient to discuss the following amendments: No. 78, in clause 124, page 50, line 11, leave out ‘non-profit’.
No. 79, in clause 125, page 50, line 22, leave out ‘non-profit’.
No. 80, in clause 126, page 50, line 41, leave out ‘non-profit’.

Lembit Öpik: We have discussed the possibility of treating profit-based registered providers in the same way as non-profit registered providers on several occasions. The amendments would simply create a level playing field between the two in terms of accounts and regulation. It is important that the regulator can address the accounts of profit-making registered providers in the same way as those of non-profit-making registered providers. I seek the Minister’s perspective on that view.

Roger Gale: The question is that the amendment be made—sorry, I call Mr. Wright.

Iain Wright: You did have an early start today, Mr. Gale, as I can testify.

Roger Gale: Order. The Minister tells me that he was still in bed, when I was broadcasting to the nation.

Iain Wright: I did not say that I was in bed—I was reading the clauses of the Bill. [Laughter.] Can we move swiftly on?
Amendment No. 230 will amend clause 174, which will allow the regulator to set standards for profit-based organisations. As we have said, we need to make it clear that given the absence of shareholders, and with the real economic interest in the activity of a business, the non-profit sector should have regulation to fill the gap and make what is going on transparent. That is essential, which is why we propose that the regulator should be able to direct non-profit providers as to the preparation of their accounts, just as the Housing Corporation does at present under the Housing Act 1996.
Given the assets with which profit-making registered providers will be entrusted, we will consider whether it is sensible to extend the regulator’s powers in relation to accounting directions to profit-making providers in the interests of transparency, as proposed by amendments Nos. 77 and 78. The hon. Member for Montgomeryshire has made a good case for amendments Nos. 77 and 78.
Having said that, amendments Nos. 79 and 80 do not make much sense. The clauses that they seek to amend apply to industrial and provident societies, which are referred to under clause 125, and registered charities, which are referred to under clause 126. By definition, such organisations cannot be for-profit. Clause 111(2) explicitly provides that
“A body is a non-profit organisation if it is a registered or non-registrable charity.”
So even if amendment No. 80 were accepted, it would have no practical effect, because there would not be any registered providers that were registered charities and profit making. As I have stated, I want to consider the appropriate role for the regulator in relation to accounting requirements for profit-making providers. On that basis, I hope that I have moved some way towards the hon. Gentleman’s argument and that he will withdraw the amendment.

Lembit Öpik: First, I apologise to you, Mr. Gale, for affecting you with my own doziness, as displayed by amendments Nos. 106 and 107. [Hon. Members: “Ooh.”] I blame myself, Mr. Gale—it was entirely my fault and I am glad to see that you have made a full recovery.
Moving swiftly back to the amendments, Government amendment No. 230, which relates to clause 174, seems to address the same point, although I had not realised that that is the case. It seems that the Government are giving the regulator the powers that I am trying to provide under clause 123 in a different way. When we get to clause 174, I hope that the Minister will expand on how Government amendment No. 230 relates to the clauses. On that basis, I am reassured that the Government have considered the matter, albeit by way of an amendment.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Iain Wright: I beg to move amendment No. 200, in clause 123, page 50, leave out line 5.
The hon. Member for Montgomeryshire is a far braver man than me, because I would never accuse you of being dozy, Mr. Gale.

Roger Gale: You are very wise.

Iain Wright: I do not know whether the hon. Gentleman is brave or stupid, but I shall leave it to the Committee to decide.

Lembit Öpik: On a point of order, Mr. Gale. I apologise to one and all in the Committee for my moment of madness. As I heard the words coming out of my mouth, I knew that I had made a dreadful mistake. I seek the forbearance of the Committee and crave your forgiveness, Mr. Gale. It will not happen again.

Iain Wright: I am sure that the Committee would like to discuss amendment No. 200, which is an example of how the new regulatory framework in the Bill differs from the current position, as defined by the Housing Act 1996. Amendment No. 200 will remove the Secretary of State’s role in agreeing to accounting directions that apply to more than one registered provider. That position is much more in keeping with an independent regulator bound by statutory objectives. It would be wrong for the Secretary of State to be involved in such day-to-day regulation. That is a change from the position as defined in schedule 1 to the 1996 Act and fundamentally further emphasises the new regulator’s greater independence from central Government. I am keen to highlight that, and no doubt we will touch on it later today.

Amendment agreed to.

Clause 123, as amended, ordered to stand part of the Bill.

Clauses 124 to 130 ordered to stand part of the Bill.

Clause 131

Charity: auditor’s powers

Iain Wright: I beg to move amendment No. 201, in clause 131, page 53, line 8, leave out ‘social housing’ and insert ‘its housing activities’.
We were on a roll, which I have chosen to stop.
Clause 131 covers the powers of an auditor or reporting accountant undertaking either a normal audit or producing an accountant’s report under clause 127 or an extraordinary audit under clause 130 in relation to a registered provider that is a charity. The charity must grant the auditor or reporting accountant access to its records, and its officers must provide such information or explanations as the auditor or reporting accountant think necessary.
The triggers for what is termed a normal audit are when income or assets from a charitable registered provider’s housing activities, as opposed to social housing activities alone, exceed certain thresholds. The amendment enables the auditor to access information about all housing activities. If the income or assets from the body’s social housing activities are below the specified thresholds, an accountant’s report is required under clause 127(3), although an extraordinary audit can be ordered under clause 130.
An auditor’s report must state whether the revenue account gives a true and fair view of the charity’s income and expenditure, so far as they relate to its housing activities. Amendment No. 201 is needed simply because the social housing activities of a charity may not encompass all its housing activities; for example, student hostels, which are explicitly excluded from the definition of social housing. The effect of the amendment is to enable access to a sufficiently wide range of information. Otherwise, only a partial picture would be given, and a comprehensive audit or accountant’s report would be inhibited. The amendment aligns the access to information with matters to be examined by the reporting accountant or auditor. It applies the current position in schedule 1(18) to the Housing Act 1996. I hope that hon. Members accept my explanation of the amendment.

Amendment agreed to.

Clause 131, as amended, ordered to stand part of the Bill.

Clauses 132 to 136 ordered to stand part of the Bill.

Clause 137

Moratorium

Iain Wright: I beg to move amendment No. 203, in clause 137, page 55, line 8, at end insert—
‘( ) The regulator shall give the HCA a copy of any notice received under this section.’.

Roger Gale: With this it will be convenient to discuss Government amendments Nos. 204 to 208.

Iain Wright: These clauses relate to the moratorium, which is an important process for protecting social housing stock. It is triggered only when a registered provider is in the most serious financial difficulties. The amendments simply add the Homes and Communities Agency to the list of interested parties that must be notified when a moratorium is triggered, extended or concluded. As has been said throughout consideration of the Bill, the HCA, as the major investor in the sector, clearly has an important interest. On that basis, I hope that hon. Members will accept the amendment.

Amendment agreed to.

Clause 137, as amended, ordered to stand part of the Bill.

Roger Gale: I had better explain to the Minister and to the Committee that I put clause 135 as stand part and the Committee accepted it. We have noticed that the Minister’s name is on a proposal to withdraw it, which we did not do. I apologise; we have been trying to push business through to get to the bits that hon. Members want to discuss, and I am afraid that the clause has now been accepted and will have to be withdrawn on Report. I apologise, and anybody else who wishes to may also do so.

Clause 138

Duration of moratorium

Amendments made: No. 204, in clause 138, page 55, line 37, leave out ‘and’.
No. 205, in clause 138, page 55, line 39, at end insert ‘, and
( ) the HCA.’.
No. 206, in clause 138, page 56, line 4, at end insert—
‘( ) When a moratorium ends the regulator shall also give notice to the HCA.’.—[Mr. Wright.]

Clause 138, as amended, ordered to stand part of the Bill.

Clause 139

Further moratorium

Amendments made: No. 207, in clause 139, page 56, line 18, leave out ‘and’.
No. 208, in clause 139, page 56, line 20, at end insert ‘, and
( ) the HCA.’.—[Mr. Wright.]

Clause 139, as amended, ordered to stand part of the Bill.

Clause 140

Effect of moratorium

Iain Wright: I beg to move amendment No. 209, in clause 140, page 56, line 25, at end insert
‘(and a purported disposal without consent is void)’.
I apologise to the Committee for my doziness. I seem to have inherited the condition of the hon. Member for Montgomeryshire—it is infectious.
Clause 140 sets out the main effect of a moratorium, which is that during it,
“the registered provider’s land may be disposed of only with the regulator’s prior consent.”
That is a key part of the process for protecting social homes when a provider is in serious financial difficulty. It allows the regulator 28 days to put together proposals to protect homes and tenants. The amendment will give teeth to that requirement, stating categorically that an attempt at disposal without the necessary consent is void. That provision applies also to disposals made without the necessary consents under chapter 5, which sets out a general disposal consents regime. On that basis, I hope that hon. Members will accept the amendment.

Amendment agreed to.

Clause 140, as amended, ordered to stand part of the Bill.

Clause 141

Exempted disposals

Iain Wright: I beg to move amendment No. 210, in clause 141, page 57, line 2, leave out ‘and 12(1)(h)’ and insert ‘, 12(1)(h) and 12ZA to 12B’.

Roger Gale: With this it will be convenient to discuss Government amendments Nos. 220 and 221.

Iain Wright: Clauses 141 and 163 set out the types of disposal for which the regulator’s consent is not required. Clause 141 covers disposals during a moratorium, while clause 163 covers disposals at any other time. Exempted disposals fall into two main types: those of the ordinary type of tenancy that a registered provider offers to its tenants, and those to tenants under statutory schemes such as the right to buy and the right to acquire. Those exemptions will allow registered providers to carry on their day-to-day business without requiring the regulator’s consent, and they will be an important part of minimising regulation as much as possible.
The amendments will add a further set of tenancy types that were omitted from the original draft. They are family intervention tenancies, which the Committee has discussed, accommodation for asylum seekers and accommodation for displaced persons with temporary protection. It is important that the list of exemptions is correct, otherwise registered providers will be required to seek consent for their day-to-day business. I therefore hope that hon. Members will accept the amendments.

Amendment agreed to.

Clause 141, as amended, ordered to stand part of the Bill.

Clause 142 ordered to stand part of the Bill.

Clause 143

Proposals: procedure

Iain Wright: I beg to move amendment No. 211, in clause 143, page 58, line 2, at end insert ‘and its officers’.

Roger Gale: With this it will be convenient to discuss Government amendments Nos. 212 to 216.

Iain Wright: The amendments are minor technical amendments that clarify the procedures in clause 143. In particular, I stress to the Committee that it makes sense to provide that officers of a provider should be notified of proposals at the same time as the registered provider itself. On that basis, I hope that hon. Members will accept the amendments.

Amendment agreed to.

Amendments made: No. 212, in clause 143, page 58, line 8, leave out ‘and officers’.
No. 213, in clause 143, page 58, line 13, leave out ‘to which’ and insert ‘if—
(a) ’.
No. 214, in clause 143, page 58, line 14, at end insert ‘, and
( ) the regulator consents.’.
No. 215, in clause 143, page 58, line 16, at end insert ‘and its officers’.
No. 216, in clause 143, page 58, line 26, leave out ‘and officers’.—[Mr. Wright.]

Clause 143, as amended, ordered to stand part of the Bill.

Clauses 144 to 146 ordered to stand part of the Bill.

Clause 147

Manager of industrial and provident society: extra powers

Alistair Burt: I beg to move amendment No. 7, in clause 147, page 60, line 8, at end insert ‘or amalgamating with another society’.

Roger Gale: With this it will be convenient to discuss amendment
No. 8, in clause 147, page 60, line 11, at end insert—
‘(3A) An instrument amalgamating industrial and provident societies has the same effect as an amalgamation under section 50 of the Industrial and Provident Societies Act 1965 (c. 12) (amalgamation of societies).’.

Alistair Burt: Good morning, Mr. Gale; it is good to see you in the Chair. I do not think that you have been affected with drowsiness.

Iain Wright: Doziness.

Alistair Burt: Doziness; well, there we are. The hon. Member for Montgomeryshire seems to have nipped out for a quick sleep, to catch up and to get his story straight for the afternoon, so we can carry on.
I thank the Minister and his officials for giving us a short prÃ(c)cis of the numerous amendments with which we are dealing today. As I said at the end of the previous sitting, it is most helpful to read through the notes, as it can cut the time that we need to spend debating amendments.
The amendment is short and technical, and its intention is clear. It provides the power to amalgamate as well as to transfer engagements in circumstances in which it is necessary for a society to do so. We were not sure whether the process of transferring would allow the opportunity for amalgamation. The amendment tries to make it clear that the clause would allow that to happen when amalgamation, rather than any other route taken by the regulator or the manager appointed by them, appears to be the answer. I would be grateful if the Minister were to say whether amalgamation was originally considered as part of the clause and whether the amendment is a helpful clarification that can easily be added to the Bill.

Iain Wright: I thank the hon. Gentleman for his kind comments, and for the manner in which he moved the amendment.
I fully understand what the hon. Gentleman is trying to get at. Indeed, I accept that there are advantages to giving a manager appointed under clause 145 a further power, as suggested in the amendment. However, I hope that he will allow me to consider the proposal in more detail, particularly to assess whether unforeseen circumstances or consequences could arise from such a widening of a manager’s powers. I hope to come back to the matter at a later stage. Although I am fully sympathetic to what the hon. Gentleman is trying to achieve, I hope that he will withdraw the amendment.

Alistair Burt: I am interested to know whether the hon. Gentleman can foresee the unforeseen consequences that he needs to consider. If he can do so, I am sure that he will be able to satisfy us. I appreciate what he had to say.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 147 ordered to stand part of the Bill.

Clauses 148 and 149 ordered to stand part of the Bill.

Clause 150

Company: arrangements and reconstrjuctions

Lembit Öpik: I beg to move amendment No. 82, in clause 150, page 61, line 11, leave out ‘non-profit’.

Roger Gale: With this it will be convenient to discuss the following amendments:
No. 83, in clause 151, page 61, line 27, leave out ‘non-profit’.
No. 84, in clause 151, page 61, line 33, leave out from ‘and’ to end of line 34.
No. 85, in clause 151, page 61, line 35, leave out from ‘and’ to end of line 36.
No. 86, in clause 152, page 61, line 38, leave out ‘non-profit’.
No. 87, in clause 153, page 62, line 7, leave out ‘non-profit’.
No. 88, in clause 154, page 62, line 28, leave out ‘non-profit’.
No. 89, in clause 155, page 62, line 37, leave out ‘non-profit’.
No. 90, in clause 156, page 63, line 8, leave out ‘non-profit’.
No. 91, in clause 157, page 63, line 21, leave out ‘non-profit’.
No. 92, in clause 157, page 63, line 24, leave out ‘non-profit’.

Lembit Öpik: The amendments have been tabled in my name and that of my hon. Friend the Member for St. Ives. It is self-evident that they seek to enforce the same principle that we discussed on a previous clause, namely to provide a level playing field for profit and non-profit organisations. There is no benefit to be had from repeating those arguments. The Minister knows what they are, and I seek his perspective, which I can guess, on them.

Iain Wright: The hon. Gentleman was mercifully short, which I welcome, and I hope to make an equally short response.
We discussed the matter earlier. The approach that we have tried to take in the Bill is to recognise as much as possible the different structures and circumstances of non-profit and profit-making providers, and to acknowledge the wider statutory environment of governance and control. I hope that I have made it clear that it is essential that the regulator maintains the current level of regulatory vigilance, for want of a better term, in respect of existing social landlords. We need to secure an orderly transition to the new system, while retaining the confidence of lenders to the sector. At the same time, we want the new system to be open and flexible, which is why we have proposed that certain requirements and regulatory powers apply only in relation to non-profit providers.
The group of amendments would extend to all registered providers that are companies the requirement to obtain the regulator’s consent for dissolution and restructuring, as industrial and provident societies must do. On that basis, and from what I outlined earlier, the amendments are not necessary. They would be too onerous, bearing in mind the various balances and flexibilities that we need to achieve. I believe that the hon. Gentleman anticipated that approach, and I hope that he will withdraw the amendment.

Lembit Öpik: That was a predictable and reasonable answer. It is evident to me that Government amendment No. 230 is becoming increasingly important in relation to this group of amendments. When we debate clause 174, will the Minister tell us how amendment No. 230 will impact on the restructuring, dissolution and accounts of profit-making registered providers? The inference on this and previous clauses to which I have moved amendments is that non-profit registered providers will be under a greater onus to conform to the clauses than profit-making registered providers. It would be helpful if the Minister were to clarify that matter when we discuss Government amendment No. 230.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 150 ordered to stand part of the Bill.

Clause 151

Company: conversion into industrial and provident society

Iain Wright: I beg to move Government amendment No. 217, in clause 151, page 61, line 27, after ‘is a’ insert ‘registered’.
This amendment will ensure the consistency of the terminology that refers to registered companies with other provisions in the Bill. I hope that hon. Members will accept it.

Amendment agreed to.

Clause 151, as amended, ordered to stand part of the Bill.

Clause 152 ordered to stand part of the Bill.

Clause 153

Industrial and provident society: restructuring

Iain Wright: I beg to move Government amendment No. 218, in clause 153, page 62, line 12, leave out ‘dissolution’ and insert ‘resolution’.
This is merely a correction to align terminology within the clause. The matters for which the regulator’s consent is required under the clause are amalgamations, transfers of engagement and conversions into companies, and not dissolutions of industrial and provident societies. On that basis, it is a minor and technical amendment, and I hope that hon. Members will accept it.

Amendment agreed to.

Clause 153, as amended, ordered to stand part of the Bill.

Clauses 154 to 161 ordered to stand part of the Bill.

Clause 162

Requirement of consent

Lembit Öpik: I beg to move amendment No. 93, in clause 162, page 64, line 32, leave out subsection (1).

Roger Gale: With this it will be convenient to discuss the following amendments:
No. 94, in clause 162, page 64, line 34, leave out ‘profit-making’.
No. 95, in clause 163, page 65, line 4, leave out ‘non-profit’.
No. 96, in clause 165, page 65, line 38, after ‘disposal’, insert ‘of social housing’.

Lembit Öpik: Amendment No. 93 is a probing amendment to challenge the inclusion of subsection (1), which states:
“Any disposal of land by a non-profit registered provider requires the regulator’s consent unless it falls within an exception”.
Do the Government intend any such disposal by non-profit registered organisations to go through the register? Is there any risk of that being overt regulation?
Amendments Nos. 94 and 95 relate to the discussion that we have already had about a level playing field for non-profit-making registered providers, and there is no need for the Minister to repeat the arguments. We are quite clear about where the Government stand, and we are comfortable with it.
Amendment No. 96 is even more interesting, because it would insert “of social housing” in the title of clause 165, making it read “Disposal of social housing without consent”. We are perennially concerned about the disbandment and reduction of social housing, and we felt that it would be useful to highlight social housing’s status. Much of our debate has been about protecting such interests, and I wonder what the Minister thinks about our proposal to raise the status of social housing in the context of clause 165.

Iain Wright: The amendments would require non-profit and profit-making providers of social housing to seek consent from the regulator for the disposal only of social housing, not of other land. The requirement to seek consent to dispose of land has been a fundamental part of the system of social housing regulation since at least 1974. It has allowed central Government and others to invest in RSLs in the full confidence that they cannot dispose of their homes and other assets without the consent of the Housing Corporation, which is right and proper.
Under the new investment and regulatory regime that the Bill establishes, as we have said on several occasions this morning, the system will be preserved for non-profit providers such as current RSLs, but profit-making providers will have to seek consent for disposal of social housing only. The purpose is to ensure that a for-profit organisation, which we hope to help to build the required numbers of social housing in order to maintain their quality, may own only a small amount of social housing among a wider stock of the property, including perhaps property for sale on the open market and other pieces of land. I know where the hon. Member for Montgomeryshire is coming from with the amendments, but it would not be appropriate for the regulator to have any control over those other assets. On that basis, I do not agree with the amendment, and I hope that he will withdraw it.

Lembit Öpik: I think that I understand the Minister’s position, and I am grateful for his response, but to be honest, I should like to discuss the issue further with the housing organisations that have been so helpful in advising me. Therefore, to make it possible for me to return to the issue on Report, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 219, in clause 162, page 64, line 35, at end insert—
‘( ) The regulator shall not consent to a disposal by a non-profit registered provider which it thinks is being made with a view to enabling the provider to distribute assets to members.’.—[Mr. Wright.]

Clause 162, as amended, ordered to stand part of the Bill.

Clause 163

Exceptions

Amendments made: No. 220, in clause 163, page 65, line 9, leave out ‘or paragraph’.
No. 221, in clause 163, page 65, line 10, after ‘12(1)(h)’ insert ‘and 12ZA to 12B’.—[Mr. Wright.]

Clause 163, as amended, ordered to stand part of the Bill.

Clause 164 ordered to stand part of the Bill.

Clause 165

Disposal without consent

Iain Wright: I beg to move amendment No. 222, in clause 165, page 66, line 2, after ‘provider’ insert
‘if either of the following cases applies.
( ) Case 1 applies where the disposal is of land other than a dwelling.
( ) Case 2 applies where the disposal is’.
This is a technical amendment to ensure that the new legislation replicates the effects of the Housing Act 1996 in relation to disposals that are made without the regulator’s consent. In general, if the regulator’s consent is required for a disposal, and consent is not given, any attempt at disposal is void. The current regime, however, provides for two exceptions that we intend to replicate in the new regime. The first, which is set out in clause 165(2), covers an ordinary individual home buyer who purchases a single dwelling from a registered provider that the latter reasonably believes is for use as their main home. I suggest that such disposals are not void because it would place an excessive burden on the home buyer to establish whether the required consent had been given before buying the dwelling.
The second exception, added by amendment No. 222, is for the disposal of land other than a dwelling, such as an office building. That will reserve the most serious consequences of a disposal without consent—the disposal therefore being void—for disposals of homes. That aims to protect the social housing stock, while placing the minimum possible burdens on third parties doing business with registered providers. I hope that that is self-explanatory and that the Committee will accept that amendment.

Amendment agreed to.

Clause 165, as amended, ordered to stand part of the Bill.

Clause 166

Separate accounting

Iain Wright: I beg to move amendment No. 223, in clause 166, page 66, line 15, at end insert—
‘( ) net proceeds of sale of property in respect of which a grant was made under section 22 of this Act in respect of discounts given by a registered provider on disposals of dwellings to tenants,’.

Roger Gale: With this it will be convenient to discuss Government amendments Nos. 224 to 228.

Iain Wright: These are technical amendments tying up the accounting requirements in relations to the disposals proceeds fund and the HCA’s new powers to make grant payments. The Bill will make no change to the right of certain RSL tenants to acquire their homes, provided for under the Housing Act 1996. When a tenant exercises their right to acquire, the RSL is required to sell the home to the tenant at a discount, which is currently of between £9,000 and £16,000. The Housing Corporation then has a statutory duty to reimburse the RSL for that discount. The RSL is required to account for both the disposal proceeds and any grant received in respect of discount in a separate disposals proceeds fund, which can be spent only on purposes determined by the Housing Corporation. That ensures that when a home is sold under right to acquire, the proceeds are invested in new homes for social rent.
This Bill replicates those provisions in their entirety for registered providers and makes no substantive changes. The amendments simply make technical changes to ensure that the system continues under the new funding arrangements of the HCA. Amendments Nos. 223 to 226, therefore, add references to the funding powers of the HCA in clause 22, under which the agency will pay grants to RSLs for discounts in respect of disposals.
Amendments Nos. 227 and 228 make technical changes to ensure that requirements to account separately for disposals proceeds are met by for-profit providers. The Bill refers to the regulator’s powers to make directions in relation to accounts under clause 123. However, clause 123 applies only to non-profit providers. The amendments, therefore, make it clear that the regulator’s direction-making powers under clause 123 and the sanctions under clauses 132 and 133 also apply to profit-making providers in relation to the disposals proceeds fund.

Amendment agreed to.

Amendments made: No. 224, in clause 166, page 66, line 16, leave out ‘that Act’ and insert ‘the 1996 Act’.
No. 225, in clause 166, page 66, line 16, at end insert—
‘( ) grant received under section 22 of this Act in respect of discounts given by a registered provider on disposals of dwellings to tenants,’.
No. 226, in clause 166, page 66, line 17, leave out ‘either of those sections,’ and insert ‘section 20 or 21 of the 1996 Act,
( ) repayments of discount in respect of which grant was received under section 22 of this Act in respect of discounts given by a registered provider on disposals of dwellings to tenants,’.
No. 227, in clause 166, page 66, line 24, leave out ‘under section 123’.
No. 228, in clause 166, page 66, line 25, at end insert—
‘( ) Subsections (4) to (6) of section 123 apply to a direction under this section as to a direction under that section.
( ) Sections 132 and 133 apply in relation to a direction under this section as in relation to a direction under section 123.’.—[Mr. Wright.]

Question proposed, That the clause, as amended, stand part of the Bill.

Roger Gale: With this it will be convenient to discuss Government new clause 43—Use of proceeds.

Iain Wright: As I have mentioned, the clause requires registered providers to operate a disposals proceeds fund, as is currently required under the 1996 Act. The new clause will put in place the final part of the system by giving the regulator the power to determine the purposes on which disposals proceeds can be spent. It also allows the regulator to require the registered provider to pay sums to the HCA, if the provider has not used them as required by the regulator in a specified period. The agency would then be able to re-invent the proceeds, for example, in more social housing stock. On that basis, I beg to move that new clause 43 be read a second time.

Roger Gale: New clause 43 will be taken whenever we reach it, which is not yet.

Question put and agreed to.

Clause 166, as amended, ordered to stand part of the Bill.

Clauses 167 to 171 ordered to stand part of the Bill.

Clause 172

Overview

Nick Raynsford: I beg to move amendment No. 345, in clause 172, page 67, line 29, leave out ‘compliance’ and insert ‘performance’.

Roger Gale: With this it will be convenient to discuss the following amendments: No. 44, in clause 173, page 68, line 3, after ‘may’ insert
‘, in accordance with subsection (2) and subject to subsection (3),’.
No. 41, in clause 173, page 68, line 3, leave out ‘as’ and insert
‘for the purpose of protecting investment in social housing or protecting the interests of tenants and residents in social housing . These standards may refer’
No. 45, in clause 173, page 68, line 7, leave out from ‘may’ to the end of line 8 and insert ‘cover-’
Government amendment No. 229
No. 42, in clause 173, page 68, leave out lines 22 and 23.
No. 43, in clause 173, page 68, line 24, at end insert—
‘(3) In setting standards the regulator shall have regard (among other matters) to landlords’ contribution to the environmental, social and economic well-being of the areas in which their property is situated.’. 
No. 47, in clause 174, page 68, line 27, at end insert—
‘(2) In setting standards, the regulator shall have regard (among other matters) to providers’ contribution to the environmental, social and economic well-being of the areas in which their property is situated.’.

Nick Raynsford: We now reach a critical series of clauses that define the regulator’s powers. This is fundamental not just to ensure that we have an appropriate, effective and proportionate regulatory regime, which provides reassurance to tenants and safeguards in respect of public finance, but one that avoids unduly burdensome regulation or red tape. We also need to be absolutely confident that this regime, and specifically the chain of command that runs from the Secretary of State through the regulator to the regulated body, does not put at risk the non-public sector status of housing associations.
I referred to both those issues in my Second Reading speech of 27 November, at column 176, and they came up again on a number of occasions when we were taking evidence in the four evidence sessions on 11 and 13 December. In particular, we heard from David Orr, the chief executive of the National Housing Federation; from Mr. Julian Ashby of Tribal, and perhaps even more importantly, a major contributor to the Cave review; and Lord Best, a well known expert on housing matters—all of whom voiced concerns that the regulatory regime as defined in these clauses of the Bill might have the perverse consequence of putting at risk the non-public sector status of housing associations, so jeopardising their ability to raise finance to supplement the public finance put into social housing provision. The scale of the private finance that is currently available is enormous: between £30 billion and £35 billion has been raised to date, and without that capacity, the whole Government programme for expanding social housing in Britain will undoubtedly be unachievable. We are talking about something hugely important, and an obvious area of risk.
I have subsequently taken a delegation comprising the individuals whom I have mentioned, as well as other representatives of concerned housing associations to meet my right hon. Friend the former Minister for Housing, now the Chief Secretary to the Treasury, to expand on our fears and to suggest ways in which the Bill might be amended to address those concerns. I pay tribute to my right hon. Friend, as I do to my hon. Friend the Minister here in the Committee, for their very constructive engagement in discussing these issues, and their willingness to work through what are a number of very complex and difficult issues to ensure that we achieve the objectives that I believe that we all share of having an effective and proportionate regulatory regime that does not threaten the non-public sector status of housing associations.
I noted my hon. Friend’s clear statement this morning, when we were considering clause 118, that he did not want to see an unduly burdensome regime of regulatory diktat; I think that I got those last two words—“regulatory diktat”—right. I hope that I did not misrepresent his position. In that instance, he was opposing an Opposition amendment, and I hope that he will adopt a similar stance in responding to these amendments, which I have tabled in order to achieve the objectives that I have just outlined.
Let me run briefly through the amendments. Amendment No. 345 would leave out the word “compliance” in subsection (b) of clause 172, and substitutes the word “performance”, so rather than reading
“gives the regulator powers to monitor performance”,
the clause would read
“gives the regulator powers to monitor performance”.
I do not need to elaborate on the significance of that change. I am talking about a regulatory regime that is concerned not only with compliance with standards set, which can often produce a tick-box mentality and lead to unduly burdensome regulatory regimes, but one that aims to ensure high performance and to avoid unnecessary interference when the organisation is meeting those standards. However, it enables the regulator to take action when there is worry about the performance of an individual body subject to regulation.
The recent unhappy affairs of the Ujima housing association, whose performance was clearly lamentable in many respects, has highlighted the importance of a regulatory regime that allows effective intervention when a housing association has not been managing its affairs well. I have absolutely no hesitation in endorsing such action. Indeed, the existence of a regulatory regime that has given confidence to lenders, tenants and members of the public has been fundamental to the success of the housing association movement over the past 30 or so years. In the event of problems, they will be dealt with effectively and tenancies will not be put at risk.
The transfer of Ujima’s properties to the London and Quadrant Housing Association Trust, a large and well-run association with a strong track record of taking over other associations in difficulty and improving on their performance, gives me optimism for belief that, with Ujima, we will see something similar—and I hope that we do. I also know that London and Quadrant wishes to maintain the specific character of Ujima, which was established specifically to serve the black and ethnic minority community. I hope that that character can be maintained under the new arrangements.
I represent an area in which Ujima held about 140 properties and I was struck over the past year and a half by the increasing number of complaints from its tenants about the poor standard of service from their landlord. It contrasted with the much higher standard of service that London and Quadrant gave to tenants living in literally neighbouring properties. The two associations were both involved in a recent development, the Rubicon development at Greenwich, which I am proud to say received an award at the London Planning Awards. It is a model of high-quality development of social housing. The London and Quadrant part of it has been exemplary. I have no doubt about the importance of monitoring performance, and that is why I am proposing the amendment that substitutes “compliance” with “performance”.
Amendment No. 44 is technical, so I shall pass straight on to amendment No. 41, which would leave out “as” in line 3 on page 68 of the Bill and insert the words
“for the purposes of protecting investment in social housing or protecting the interests of tenants and residents in social housing.”
That is the nub of my objective. It sets out what regulations should be about. I want to protect public investment in social housing and the interests of tenants and residents. That is absolutely fundamental to a good regulatory regime, and that it why it is important that it should be made clear at the outset that those principles are the purpose of the regulator’s activities.
Amendments Nos. 42, 43 and 47 deal with the environmental, social and economic well-being of an area. We have touched on that already, so I will not say much more now other than that it is right for the regulator to take account of that aspect of the performance of a registered social landlord—a body registered by the new regulator—but it is difficult to operate a regulatory regime that does not fall into the trap of becoming either tokenistic, involving a tick-box mentality, or unduly burdensome. The proposal emphasises the importance of looking at the contribution that registered landlords make rather than imposing standards and monitoring how far those standards have been complied with. It has a similar objective to the earlier amendment.
The amendments would clarify the key purposes of regulation, which is about protecting tenants’ interests and public finance. That would ensure that we had a proportionate, non-burdensome and non-bureaucratic style of regulation and, above all, avoid putting at risk the non-public sector status of housing associations by creating an unbroken chain of command from the Government to the regulated body. That is the purpose of the amendments, and I hope that my hon. Friend the Minister will be able to respond sympathetically, even if he cannot accept them, as I suspect will be the case.

Iain Wright: I would argue that this is potentially the most serious and important group of amendments that we have discussed so far, certainly in terms of the possible consequences if we get things wrong. I vividly remember Lord Best’s evidence to the Committee in December, when he said that it was simply not worth getting public sector classification wrong, and I absolutely agree. As became clear from the excellent speech made by my right hon. Friend the Member for Greenwich and Woolwich on Second Reading and from contributions by Lord Best and others in our oral evidence sessions in December, this part of the Bill is arguably the most controversial of the lot. I am, however, satisfied that the changes that we are introducing in the Bill do not affect the sector classification of RSLs and I shall come on to that in some detail when I respond to my right hon. Friend.
Before I do, however, I should tell the Committee that I spent the weekend on the internet looking—sad man that I am—at the report of the Committee stage of the Health and Social Care (Community Health and Standards) Act 2003. My right hon. Friend was an excellent member of that Committee, which discussed foundation hospitals, and I remember with great interest his comments about public sector classification. He also contributed to an Adjournment debate about public sector classification in July 2004. I have done my research quite well over the weekend and I am extremely apprehensive about discussing public sector classification with at least two fantastic experts on the issue—my right hon. Friend and the right hon. Member for North-West Hampshire. However, I will do my best.

Alistair Burt: I have just stepped in to give the Minister a break before what will probably be among the most difficult 10 minutes of his career, as he faces my right hon. Friend the Member for North-West Hampshire and the right hon. Member for Greenwich and Woolwich. In case he did not notice, however, this weekend was an FA cup weekend, and if he is saying as a representative of the alleged party of the people, that he spent his weekend on the internet checking the issues before us, instead of following the fortunes of our various teams, I am very surprised.

Angela Smith: Hartlepool was not playing.

Iain Wright: As my hon. Friend says from a sedentary position, Hartlepool United was not—it pains me to say this—involved in the FA cup on Saturday, although I will leave it to hon. Members to work out the reasons why.
I hope that you will not rule me of out order, Mr. Gale, but I should pay tribute before I go on to my right hon. Friend the Member for Pontefract and Castleford (Yvette Cooper), who has been promoted to Chief Secretary to the Treasury. She was an excellent Housing Minister, who pushed social housing to the very top of the political agenda. She was also a great boss and she will do a fantastic job as Chief Secretary to the Treasury. In addition, I think that the Minister for Housing, my hon. Friend the Member for Don Valley (Caroline Flint) will prove to be a fantastic successor. In paying tribute to her, however, I should point out that Hartlepool United is tonight playing Doncaster Rovers, which is her team, so I do not want her to have too good a start in her new ministerial position.
That said, let us move on to the extremely serious issue before us. I pledge to my right hon. Friend the Member for Greenwich and Woolwich that we are considering the entire structure of this part of the Bill, particularly in relation to directions and the standards system. That is largely in response to the concerns that he has raised, and I pay tribute to him for what he has done on the issue. I shall certainly consider the points that have been raised in these very thorough amendments when we table our own amendments at subsequent stages in our consideration of the Bill.
Some of the arguments relating to the powers given to the regulator in clauses 173 and 174 suggest that the regulator should not be able to set binding standards with which providers must comply. At present, the Housing Corporation issues guidance to registered social landlords, which, if approved by the Secretary of State, can be taken into account by the corporation in considering whether mismanagement or misconduct has occurred, or in exercising its powers to secure the proper management of the landlord’s affairs.
My right hon. Friend the Member for Greenwich and Woolwich and others believe that the regulator’s standards should merely be a matter to be taken into account in assessing whether there has been misconduct or mismanagement, rather than being directly enforceable. Indeed, the proposed amendment to clause 178 would achieve precisely that result.
I realise that this is not a stand part debate, but I want to go back to first principles and set out what we are trying to achieve. It is important to set out to hon. Members that the regulator will be operating in a different environment to that currently operated by the Housing Corporation. The Housing Corporation is responsible for paying significant amounts of grant—billions of pounds. While not explicitly described as an enforcement power in the Housing Act 1996, the possibility of withholding grant if the corporation has serious concerns about the management or performance of a registered social landlord is arguably the most important weapon in its enforcement armoury.
Mere guidance may have a much stronger effect on an RSL’s behaviour under the current Housing Act system, where non-compliance could have serious financial consequences. That particular unstated enforcement power will not be available to the new regulator, since, as we are all aware, the Housing Corporation’s grant and investment functions are to go to the HCA instead.

Nick Raynsford: I am following my hon. Friend’s argument closely. He rightly focuses on the fact that the new regulator will not have any direct power to withhold grant, unlike the Housing Corporation, but from an earlier series of debates, when we were considering linkages and liaison between the HCA and the regulator, we established that it would be proper for those two bodies to talk to each other. I would hope that in the event that the regulator had concerns about the performance of an RSL, it would draw them to the attention of the HCA, which could then have the effect that he has described under the current regime, of leading the HCA to withhold grants. While I hear his point, I do not think that it is going to be a completely black and white issue of powers that used to exist no longer existing and the sanction of withholding grant no longer being in any way available.

Iain Wright: I absolutely agree with my right hon. Friend’s comments. Clause 102(3), on the terms of direction that the regulator can provide to the HCA, will be important. Nevertheless, I return to the point about the splitting of the regulatory and investment functions, which are currently under the one roof of the Housing Corporation. Although I fully understand where my right hon. Friend is coming from, I would suggest that the circumstances in which the regulator will be able to prevent the agency from paying grant are possibly narrow, although there will be discussions. Arguably, that is the implicit point of the split between regulation and investment. On that basis, the regulator may need a stronger basic framework of standards with which registered providers must comply, although I am clear that the regulator must be able to enforce compliance with its standards.
I am also clear about the role of the Secretary of State. In the context of the Bill, the Secretary of State should and would only ever issue strategic directions on standards. As Martin Cave pointed out in his review, the emphasis should be on rents, on physical maintenance and conditions, and on tenant engagement and consultation. I envisage that those will be the topics where the weight of Government interest—I use that phrase carefully—would lie.

Alistair Burt: I am following the Minister intently. Yes, that is where the weight of Government interest may be. However, the Government are subject to other swathes of opinion. The problem with the clause as it is drawn is that there is no guarantee that there may not be other matters—beyond the regulator’s stated objectives—that the Government might press on the regulator in order to force direction under clause 177. That is what the right hon. Member for Greenwich and Woolwich is getting at. I am not sure if he is making a clear enough distinction between the powers that the regulator should be using and the drive that will come from the Government.

Iain Wright: I have put on record my intention to look at the matter again. Although I am very keen to engage with my right hon. Friend the Member for Greenwich and Woolwich, with stakeholders and with others to reassure them as much as possible, a balance needs to be struck. The whole point of our proposed regulatory regime is to maintain and improve standards for tenants. Cave has suggested that that will take place in three broad areas: rents, physical maintenance of the estate and tenant consultation and engagement. That is important. I used my words very carefully, and I think that that is where the weight of Government interest will lie. Amendments will be brought forward to that effect. I do not want to pre-empt what I will do or pre-empt discussions that I am going to have with my right hon. Friend the Minister for Housing, and with stakeholders, but I think that I am hinting, as much as I can, what I intend to do.
I do not want to seek to direct very detailed standards. That is the job of the regulator. I do not wish to see or intend to use the power to secure detailed management control of registered providers on the part of the Secretary of State. We do not want to achieve that. I still maintain, regardless of all the concerns that have been raised, that it would not be possible to have any such detailed management control from the Secretary of State or the regulator.
In a previous sitting, we discussed the fundamental objectives of clause 86, which are a very important part of the Bill. Clause 86(11) states:
“Objective 10 is to regulate in a manner which—
(a) minimises interference, and
(b) is proportionate, consistent, transparent and accountable.”
That important objective should not be disregarded. The whole basis on which standards are set will be based on that 10th objective. I hope that that reassures the Committee.
Bearing in mind my commitment to look again at this whole area, I now come on to the extremely important issue of public sector classification, which gave me nightmares over the weekend. I am aware of the great concern over the private sector status of registered social landlords and Office for National Statistics classification, and I want to clarify the Government’s position. David Orr of the National Housing Federation and Lord Best mentioned their concerns in the oral evidence sessions. They do not want to see a change in the status of RSLs. Frankly, neither do the Government and we do not want to seek direct management control. What I hope to do is to liberate from the burden of regulation well-performing, viable RSLs, which have satisfied tenants.
As regards current powers and current ONS classification, let me make it very clear that ONS has already classified RSLs as being in the private sector for the purpose of national accounts. That classification was there before any changes in the Bill. It is true that the Housing Corporation already has certain strong powers. For example, it can already put directors on the boards of RSLs, it can hold an inquiry and transfer assets to another owner. It can also require consents to disposals of social homes. Such powers exist already and do not affect classification and we have no intention of changing them.

Nick Raynsford: My hon. Friend is perfectly right to say that the Housing Corporation has significant powers. As I said earlier, that is appropriate and necessary, and is compatible with the non-public sector status and classification of housing associations. The important distinction is that under the existing regulatory framework, the Secretary of State does not have the powers in clause 177 to give direction to the Housing Corporation on standards to be complied with. That is the nub of my anxiety. The new legislation will create a direct chain of command: the Secretary of State can direct the regulator who can in turn impose standards on regulated bodies and require compliance with those standards. That is a new element that will—informed commentators have considered this—put at risk the non-public sector status.

Iain Wright: I accept my right hon. Friend’s point. Under the Bill as it is currently drafted—I stress “as it is currently drafted”—the regulator’s standard-setting powers could be subject to direction from the Secretary of State. We are reconsidering that, and I pledge to keep the Committee and in particular my right hon. Friend informed on that issue.
My right hon. Friend made an important point about the Bill containing additional powers, but those powers are limited. They enable the regulator to impose fines and obtain compensation for tenants, and they require the transfer of management of poorly performing RSLs. The additional powers are much like those for normal, private sector utilities, and are modelled—to use the word of the moment—on the current, modern regulatory regime. They bring regulation into line with other regulated industries and are not, in any sense, management control.

George Young: May I press the Minister on the evidence that the former Minister for Housing, now the Chief Secretary to the Treasury, gave to the Committee? She said:
“We have had considerable discussions with the Treasury. I have asked about potential arrangements for taking advice from the ONS in advance of the Committee stage, as opposed to the normal approach in which the ONS gets asked afterwards. It would be helpful to have its advice in advance, and I have asked for it.”——[Official Report, Housing and Regeneration Public Bill Committee, 13 December 2007; c. 142, Q233.]
What has happened to it?

Iain Wright: I vividly remember that the right hon. Gentleman responded by saying something like, “Not half.” If he will allow me, I shall come to that important point in a moment or two.
First, let me explain the general thrust of my argument. The additional powers are similar to those for private sector utilities and are part of the regulatory regime. Nothing is changing in that regard. The powers bring regulation into line with other regulated industries and are not in any sense management control. I want to stress that point.
The regulator setting standards and fining bodies for transgressing them is no different from the water regulator fining a utility, or the Health and Safety Executive imposing fines. No one is saying that the bodies that are subject to that sort of regulation are public bodies. Let me give a few examples. Ofwat has powers to fine water and sewerage companies if they breach statutory duties or licence conditions or if they do not meet required standards of performance. The areas for which they are subject to licence conditions and standards of performance and for which they have statutory duties include breaching rules on training arrangements and providing substandard services to customers by failing to meet guaranteed standards of service.

Nick Raynsford: I accept entirely the Minister’s analogy. He will know from what I argued earlier that I have no difficulty with standards being set for the core functions of protecting public finance and the interests of tenants. However, I do not know of any power requiring private utilities such as those delivering water to make a contribution to the environmental, economic and social well-being of an area. If there is such a power, I would be interested to hear about it. That is the worry about the formulation in the Bill—there is scope for mission creep. That point was raised by the hon. Member for North-East Bedfordshire, but I am also concerned that because of the wide range of issues on which the regulator can specify standards, and the ability of the Secretary of State to direct the creation of standards, there is the risk of a wider chain of command that might put the classification at risk.

Iain Wright: I fully understand and appreciate the point raised by my right hon. Friend. We have already discussed issues about environmental and social well-being. Can I give notice to the Committee that, following my point about the utilities, I will go on to address the points made by the right hon. Member for North-West Hampshire with regard to what we have done about getting clarification from the ONS. I will then come on to the specific point about environmental, social and economic well-being.
The Health and Safety Executive is another example of a regulated body. It regulates and can impose fines for breaches of the Health and Safety at Work Act 1974—for example, a failure to ensure the health, safety and welfare of employees. Again, private companies remain classified as private sector for the purposes of national accounts. Ofgem regulates the gas and electricity networks and has powers to take enforcement action including imposing financial penalties for breaches of requirements imposed under various Acts—the Gas Act 1986 for example, or issues of unfair customer practices. The private sector classification of utilities such as the gas and electricity networks are not in any doubt. I am reluctant to mention this point, as I know that the right hon. Member for North-West Hampshire has a whole range of knowledge with regard to it. However, in terms of Network Rail and the whole rail infrastructure, the Office of Rail Regulation has a range of statutory powers under the Railways Act 1993. It issues licenses with a number of conditions or provisions with which the licence holder must comply. Given those important examples, the message is clear. There can be significant obligations placed on companies with regard to their regulations, without any question of their private sector status. I hope that reassures hon. Members.
The point raised by the right hon. Member for North-West Hampshire is important in terms of dealing with the ONS and the Treasury. There has been considerable discussion with the Treasury about the matter. During his review, Martin Cave discussed his emergent thinking with Treasury officials, to understand the implications for the classification of his proposed changes to the regulatory system. My own officials have discussed the changes proposed in present legislation with the Treasury during the detailed drafting and development of the Bill. A meeting took place on 2 October 2007. After the introduction of the Bill to the House, my officials again considered the changes in the Bill with the Treasury. That took place on 21 December 2007 after the oral evidence sessions.
Earlier this month on 7 January, the Chief Secretary to the Treasury, my right hon. Friend the Member for Pontefract and Castleford,who was then Minister for Housing, and I met with departmental and Treasury officials. We asked the Treasury at that meeting about the arrangements for taking advice from the ONS—precisely as my right hon. Friend the Member for Greenwich and Woolwich said in response to the question put by the right hon. Member for North-West Hampshire. We asked the Treasury in its capacity as experts on the production of the public finances, and, for want of a better term, the owner of the Government-ONS relationship—

Andrew Love: I am listening intently. As the Minister has indicated, this is a complex area. However, he will be aware of the recent Statistics and Registration Service Act 2007, which gives the ONS and statistics generally much greater independence from the Treasury. I wonder whether he has sought reassurance from the Treasury that his view would be reflected in the new ONS and statistics structure.

Iain Wright: My hon. Friend has no idea how grateful I am for that intervention.

It being One o’clock, the Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Four o’clock.